Tribunal limits disallowance on bogus purchases to 12.5% due to lack of appeal, focusing on taxable profit.

The Tribunal upheld the decision to restrict the disallowance on account of bogus purchases to 12.5% of the value, citing the absence of appeal from the assessee and the insignificant amount involved. The Tribunal considered only the profit element taxable, as the sales were not disputed by the Revenue, ultimately dismissing the Revenue's appeal.

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Issues:
- Whether the Commissioner of Income Tax (Appeals) was justified in restricting the disallowance made on account of bogus purchases to 12.5% of the value thereof.

Analysis:
The Appellate Tribunal ITAT Mumbai dealt with an appeal regarding the assessment year 2011-12 arising from the order by the ld. Commissioner of Income Tax (Appeals)-8, Mumbai. The main issue in this case was the justification of restricting the disallowance made on account of bogus purchases to 12.5% of the value. The assessee, a public limited company engaged in the business of manufacturing and trading of granites, marbles, slate designer mosaics, natural stone, had made purchases amounting to &8377; 3,71,535 from a dealer named M/s. Henil Sales Agency, which was flagged as a tainted dealer by the Sales Tax department of the Government of Maharashtra. The ld. AO treated these purchases as ingenuine and disallowed the amount in the assessment. The assessee provided various details related to the purchases, including invoices, delivery challans, stock registers, and payment evidence. The ld. CIT(A) noted that while the purchases could have been made from the grey market for VAT savings, the sales from these purchases were not in dispute. Therefore, only the profit percentage was considered taxable at 12.5%.

The Revenue, aggrieved by this decision, appealed before the Tribunal. The Tribunal observed that the assessee did not appeal the CIT(A)'s decision due to the small amount involved. The ld. AR representing the assessee highlighted that the disputed amount of &8377; 3,71,535 was a minuscule portion of the total purchases amounting to &8377; 5.35 Crores, approximately 0.7%. Since the revenue did not question the sales made from the alleged purchases, only the profit element was considered taxable. The Tribunal upheld the CIT(A)'s decision to estimate the profit element at 12.5%, citing a precedent from the Hon'ble Gujarat High Court. Finding no infirmity in the decision, the Tribunal dismissed the Revenue's grounds of appeal, resulting in the dismissal of the Revenue's appeal.

In conclusion, the Tribunal upheld the decision to restrict the disallowance made on account of bogus purchases to 12.5% of the value, considering the facts and circumstances of the case and the absence of any appeal from the assessee. The Tribunal's decision was based on the principle that only the profit element from the disputed purchases could be taxed, as the sales were not under question by the Revenue.

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